Earnings weaken for Japan Foods Holding

Restaurant owner Japan Foods Holding has achieved a net profit of S$3.8 million (US$2.75 million) on the back of S$62.8 million in revenue for its financial year ended March 31.

This is despite weaker earnings as a result of higher expenses because of expanding its network and brand portfolio against a backdrop of rising competition and a slowing economy.

Gross profit came in at $52.9 million, up 1.1 per cent from the previous year’s $52.3 million, thanks to an 0.8 per cent rise in gross profit margin to 84.2 per cent mainly because of the efficient use of raw materials and cost savings from self-produced noodles and bulk-purchase discounts.
Net profits were down 20.3 per cent while revenue was flat.

Japan Foods says it was able to keep sales at the same level because of its proven strategy of seasonal promotions, regular menu rejuvenation and restaurant portfolio management. However, the group’s bottomline was mainly impacted by a one-time impairment charge related to store closures.

Fourth-quarter net profit fell 68.1 per cent to $500,000 despite revenue growing 5.8 per cent to $15.7 million. Earnings fell sharply because of running expenses more than tripling, a result of higher royalty fees for more franchised brands, and store closures.

During the year the group launched three brands. Its first non-Japanese offering, New ManLee Bak Kut Teh, franchised from Malaysia, was launched in December with the opening of its first store in Clementi. It opened its second outlet under this brand at Ang Mo Kio Hub in March, and a month later a third at Bugis Junction.

Two new brands

Two other self-developed brands were introduced – Ginza Kushi Katsu and Dutch Baby Cafe in March and April respectively, both at The Paragon on Orchard Rd, Singapore.

“The response to our new brands has been encouraging,” says executive chairman/CEO Takahashi Kenichi. “Customers have taken to New ManLee Bak Kut Teh particularly well. We will continue to monitor its progress and add more restaurants under this brand if it continues to perform strongly.”
Japan Foods’ portfolio in Singapore stood at 47 restaurants as at March 31, compared to 45 at the same time last year. There was still one food court outlet.

The group’s flagship brand and main revenue generator Ajisen Ramen, together with the Keika Ramen brand, dropped $1.5 million in revenue to $26.9 million, mainly because of the closure of two restaurants under those brands. The Compass Point and Tiong Bahru Plaza restaurants closed because of mall renovation works, while the restaurants at Parkway Parade and Jurong Point Shopping Centre closed when their leases expired. The restaurant at Clementi Mall was converted to the New ManLee Bak Kut Teh brand in March.

Restaurants under the other flagship brand Osaka Ohsho continued to perform healthily, with a net $200,000 increase in revenue to $8.6 million. This was attributed to full-year revenue
contributed by new restaurants in Bugis Junction, AMK Hub and East Point Mall.

Meanwhile, other branded restaurants performed strongly, generating a net $1.4 million increase in combined revenue to $14.8 million thanks to contributions from new restaurants under the Hanamidori, Keika Ramen, Kazokutei and New ManLee Bak Kut Teh brands, as well as more revenue from existing restaurants Japanese Gourmet Town and Boteyju.

Sales of food ingredients fell $67,000 because of lower demand from the group’s sub-franchisees.